Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points under your existing one? That may have been accurate a while back, but with refinancing dropping in cost recently, it's a good time to explore the options of a new mortgage loan! A refinance may be worth its cost many times over, factoring in the benefits that may come, along with a reduced interest rate.
When you refinance, you may have the ability to reduce the interest rate and monthly mortgage payment , sometimes considerably. You also might be given the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage, enabling you to build up your equity faster.
Fees and Expenses
All these benefits do cost something, though. With your refinance, you are paying for most of the same things you were charged for when you obtained your current mortgage loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might investigate paying points to receive a reduced interest rate. Your savings over the life of the loan may be substantial if you have paid up front about 3% of the new loan balance. Please consult with a tax professional before acting on rumors that the paid points may be deducted on your taxes.
Speaking of taxes, if you reduce your interest rate, naturally you'll also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is another expense that borrowers consider. Call us at 623-340-0934 to help you do the math.
Most borrowers find that the savings each month outweigh the up-front cost of refinancing. We'll work with you to determine what mortgage loan program is perfect for you, considering your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing will probably have on your taxes. Call us at 623-340-0934 to get you started.
Want to know more about refinancing your home? Call us: 623-340-0934.